Wednesday, November 05, 2008

ValueCap: Stop the Half-Truths!

The New Finance Minister Should Stop Misleading Malaysians with Half-Truths

Two days ago, in a shocking expose by TheMalaysianInsider.com, it appears that the RM5 billion injection into ValueCap Sdn Bhd was not intended as “additional” investment to support the flailing stock market as suggested by the new Finance Minister – but instead it's a rescue package designed for ValueCap Sdn Bhd to repay its RM5.1 billion debt which is due in a few months.

We are now in possession of documents which are publicly available from the Securities Commission website, which include the Term Sheet as well as the Principal Terms & Conditions of the RM5.1 billion bond issued by ValueCap Sdn Bhd on 28 February 2003.
Issue Size : Up to RM9,950,000,000 nominal amount of Bonds.
Tenor of the issue:
Three (3) years from the date of the first issue of the Bonds. Upon maturity, the Bonds shall be renewable for up to three (3) years at the discretion of the Bondholders.

The Bonds will be issued over a a period of twelve (12) months from the first issue of the Bonds (or such later date as may be agreed by Valuecap and the Bondholders, but in any case not later than three (3) years from the date of the first issue of the Bonds).
The lastest Audited Report of ValueCap in 2007 also confirmed that there is an existing “long-term deferred liability” amounting to RM5.1 billion.

As the bond has already been extended by 3 years as allowed in the terms of the bond in 2006, ValueCap is required to return the monies to the 3 bondholders, EPF, Khazanah and Permodalan Nasional Berhad come February 2009.

Therefore, when the new finance minister, Datuk Seri Najib Abdul Razak said that “the Government has doubled the amount of money available to buy undervalued stocks to RM10bil and will also continue with its spending to boost the country’s economy,” as reported in the Star on October 21st, his statement can at best be described as a half-truth.

The injection of additional RM5 billions from EPF to ValueCap has been widely criticised as not being able to achieve its purported objective of “to boost the economy and protect Malaysia from the effects of the global financial turmoil” for the amount forms only an estimated 1% of the Bursa Malaysia stock market capitalisation and supporting the stock market only treats the surface impact of the global financial crisis, and not the fundamental elements of the economy.

Hence, the expose clearly provides the real rationale behind the sudden RM5 billion loan from EPF to ValueCap which is a mega bail-out of Valuecap whose investment lifespan has already ended nearly 3 years ago.

However, despite the expose and media coverage over the last 2 days, the new Finance Minister has refused to answer the allegations, and instead brushed them aside by saying that the involved parties knows best what to do with the new RM5 billion(!)
Finance Minister Datuk Seri Najib Razak defended the RM5 billion injection into ValueCap via a loan from the Employees Provident Fund (EPF) despite an outstanding RM5.1 billion debt, saying that the company has performed well so far.

"The shareholders are happy and have gotten returns. They will decide what is the best way to handle it," he said referring to the sum owed in interest-bearing unsecured bonds.
In addtion, we demand full and immediate accountability and transparency of ValueCap investment since 2003, as per all international investment funds to explain its inability to “repay” the initial loans from EPF, Khazanah and Permodalan Nasional Bhd.

We would like to call upon the new Minister of Finance to withdraw the RM5 billion injection to ValueCap which serves only deal with the symptoms of global financial crisis and does not in anyway serve to increase Malaysia's ability to face the challenges brought about by the crisis. What is worse, is that it puts at risk the hard-earned retirement savings of ordinary Malaysians.
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